Late Payment Act fails to bite - Ucatt fears tax retreat

A significant trend has emerged for main contractors to protect their position by lengthening the payment period, according to Rudi Klein, legal adviser to the Specialist Engineering Contractors group (SEC).

Klein said the Late Payment of Commercial Debts (Interest) Act 1998, which came into force on 1 November, seemed unlikely to bite in construction. He added: "Late payment is going to become a less significant issue. There is a lack of clarity over when the act will apply in this industry.

"It is not clear whether entitlement to interest applies from the point at which payment first becomes due or when it is finally due to be handed over."

Klein said there had been a marked increase in the number of construction insolvencies this year. "That means we have got to get the question of payment protection and trust funds back on the agenda," he continued. "The Government has said that it will review how the Latham legislation is working out. And we will be reminding the Government of this."

Specialist contractors were also experiencing widespread problems with adjudication. "We must have a single, statutory adjudication procedure," declared the SEC group adviser. "We now have all kinds of adjudication procedures. It is a nightmare. It is sheer and utter madness.

"We are shooting ourselves in the foot. There are all kinds of weird and wonderful bespoke adjudication procedures. Adjudicators are having a horrendous time working them out. And it is all adding to the cost of adjudication." George Brumwell, general secretary of Ucatt, said this week that his union was concerned that the industry's new tax scheme was in danger of being watered down.

"We are hoping to set up a meeting with Dawn Primarolo, financial secretary at the Treasury," he said. "We see some of the changes to the tax scheme as opening the door to a drift back to self-employment."

The Ucatt chief was speaking in the wake of the Inland Revenue's announcement of amendments to the revised construction industry tax deduction scheme which comes into effect from 1 August, 1999.

The amendments offer concessions on how the turnover threshold is calculated, and allow more workers to qualify for the CIS certificates which permit gross payment. Ucatt claims that this will offer the incentive to many workers to exploit a tax loophole.